The global defence landscape is entering a period of structural realignment. The EU–Australia Security and Defence Partnership, signed in March 2026, now sits alongside the recently concluded EU–Australia Free Trade Agreement negotiations and the opening of Horizon Europe association talks, forming a new commercial architecture between the two regions. For defence manufacturers in Australia and Northern Europe, the practical significance is immediate. Procurement pathways that were previously difficult to access are now being structured. Capability gaps in both regions are creating demand that neither can fully meet alone. The trust framework that underpins defence trade has been formally extended across the two hemispheres for the first time.

For defence industry SMEs, primes and advanced manufacturers on both sides of the partnership, the opportunity is established. The practical question is how to be ready for it.

Why the demand is accelerating

European defence spending is accelerating

The EU and its member states are rearming at a pace not seen in decades. The NATO Hague Summit in June 2025 saw allies commit to a new defence spending target of 5% of GDP, replacing the earlier 2% guideline. European defence budgets have already risen by more than 30% in real terms between 2021 and 2024, with a further €100 billion projected by 2027 (European Parliament).

Germany is lifting its defence budget from €86 billion in 2025 to €152 billion by 2029. Denmark has introduced a 50 billion DKK acceleration fund for 2025–2026, on top of structural increases. Sweden is planning the largest rearmament programme since the Cold War, with a loan-financed investment envelope of up to SEK 300 billion through to 2035 (Business Sweden; Bird & Bird).

A new €150 billion financing facility has opened

In May 2025, the Council of the European Union adopted the Security Action for Europe (SAFE) regulation, a €150 billion loan facility for joint defence procurement among member states (Council of the European Union). Nineteen member states submitted funding requests, with Poland alone allocated over €43.7 billion. National Defence Investment Plans were due by the end of November 2025, and implementation is now underway.

SAFE is tightly structured. Procurement contracts require that no more than 35% of component costs originate from outside the EU, EEA, EFTA or Ukraine. Projects involving strategic enablers, including air defence, C4ISTAR, space assets and munitions, are subject to stricter conditions (Council of the European Union).

The EU–Australia Security and Defence Partnership creates a pathway into this system. Australia is now among a small group of partner nations that can negotiate enhanced participation under SAFE, with Australian companies eligible to participate in common procurements with EU member states (Australian Institute of International Affairs; IISS).

Australia is expanding capability in parallel

On the Australian side, the Defence Industry Development Grants Program 2026 offers Australian SMEs up to $1 million in matched funding across four streams: Sovereign Industrial Priorities, Skilling, Exports and Security. AUKUS Pillar 1 is driving a generational build-up in submarine industrial capability, while Pillar 2 is accelerating collaboration on quantum, directed energy, autonomous systems and electronic warfare. The AUKUS licence-free export framework, operational since September 2024, has materially reduced friction for defence trade between Australia, the UK and the US (Department of Defence; Australian Defence Magazine).

Sovereign platforms like the MQ-28 Ghost Bat are already being positioned for export into Europe and the United States. The UK’s 2025 Defence Industrial Strategy explicitly points to the Australian model of nurturing sovereign capability through strategic partnerships with foreign manufacturers (ASPI).

Where Northern Europe and Australia fit together

Northern Europe brings scale, deep technical heritage and a concentrated industrial base. Sweden’s Saab, Norway’s Kongsberg, Finland’s Patria and Nammo, and Denmark’s growing defence manufacturing cluster all sit inside an increasingly integrated Nordic system. NORDEFCO’s Vision 2030, signed in April 2024 following Finland’s and Sweden’s NATO accession, is pushing harder on shared procurement, ammunition certification, military mobility and security of supply (Government of Sweden; Finnish Ministry of Defence).

Australia brings a different set of assets: secure geography, exposure to critical minerals, strong advanced-manufacturing SMEs, and a trusted status within both AUKUS and the Five Eyes framework. Australian manufacturers across electronics, precision engineering, materials science, and engineered components already supply global primes.

The complementarity is specific. Nordic programmes need resilient supply chains, geographic diversification, and access to Indo-Pacific markets. Australian manufacturers need a route to market in Europe’s rearmament, a pathway into NATO-standard procurement, and a stable export corridor that sits outside US-only channels.

Where the practical opportunities sit

Supplying into European primes and joint procurement programmes

Australian manufacturers with existing quality certifications (AS9100D, ISO 9001, JOSCAR, DISP) are well-positioned to enter European supply chains as second-source or resilience suppliers. The SAFE instrument’s 35% non-EU content allowance is a commercial opening: it deliberately opens a portion of spend to qualified third-country suppliers, and qualified Australian manufacturers are well placed to compete for it.

Categories where Australian SMEs have credible positions include precision-cut sealing and insulation components, EMI/RFI shielding, PCB design and assembly, electronic warfare subsystems, and specialised materials for extreme-environment applications.

Cross-border consortia for Horizon Europe and dual-use R&D

With Horizon Europe association talks now underway, Australian defence-adjacent research institutes and SMEs have a clearer pathway into multi-partner consortia on critical technologies, quantum, cyber, space and autonomous systems. Dual-use programmes are likely to move fastest under the EU–Australia framework, as they sit at the intersection of the FTA, the Security and Defence Partnership, and Horizon Europe.

Nordic market entry for Australian platforms and systems

Denmark, Sweden, Norway and Finland are all running parallel capability build-ups in uncrewed systems, maritime surveillance, artillery, air defence and cyber. Australian sovereign platforms, particularly in uncrewed air systems, counter-UAS and specialist sensing, have a practical fit with Nordic and Arctic requirements. Market entry via a Nordic partner, distributor or joint venture is generally faster than attempting to sell cold across 27 EU markets.

Nordic investment and partnership into Australian production

The flow is two-way. Nordic defence companies are actively looking for Indo-Pacific footprints, both to support their own export growth into the region and to de-risk production geography. Australian joint ventures, licensed manufacturing and co-development arrangements offer a credible pathway. Several Nordic primes are already exploring Australian partners for in-country assembly, sustainment and Pacific-region customer support.

What readiness looks like

Defence procurement rewards preparation. The organisations that will move first are the ones that have already done the structural work: export controls registration, security certifications, identified partners in-market, and a commercial model that survives contact with procurement timelines measured in years rather than quarters.

Practical preparation involves four areas:

• Compliance and accreditation: DISP certification in Australia; CE marking and national defence authority registration in target EU markets; alignment with SAFE eligibility conditions where relevant; AUKUS authorised user registration where applicable.
• Partner identification: primes, tier-one suppliers, distributors and joint venture candidates who can carry a credible proposal into national procurement processes on either side.
• Capability articulation: translating what a company does into the language of European and Nordic procurement taxonomies, which are often more specific and more standards-driven than Australian equivalents.
• In-market presence: a credible point of contact, representation, or operational footprint in the relevant region. Defence primes and government buyers across Europe and Australia place significant weight on physical presence and local accountability.

How Nord South Partners and Small and Mighty Group support organisations

Small and Mighty Group has worked with several Australian defence manufacturers on strategy, market positioning and commercial readiness. Our clients include long-standing suppliers to Australian defence and aerospace primes such as Thales, Rheinmetall and Boeing with capability spanning precision engineering and advanced electronic design and manufacturing across defence, aerospace, medical and industrial markets. Leadership across these clients holds senior roles within the Australian Industry & Defence Network (AIDN), including recent tenure at the national board level.

The Small and Mighty Group team has participated in Land Forces, Australia’s largest land defence industry exposition, multiple times and regularly engaged with AIDN and its state chapters. Land Forces 2026 will be held in Perth from 6–8 October, and is a practical entry point for European defence companies looking to understand the Australian landscape, as well as for Australian SMEs seeking to build relationships with international primes and delegations.

In Europe, the Eurosatory 2026 event, held 15–19 June, is another strong opportunity for both sides to begin building familiarity with each other while establishing new networks and collaborative partnerships.

Nord South Partners complements this work by focusing on cross-border commercialisation between Northern Europe and Australia, helping defence manufacturers move from intent to structured market entry and in-market delivery. The work includes market entry strategy, partner identification, capability translation, and in-market representation between Brisbane and Denmark, with staged execution that reflects the realities of defence procurement timelines.

Nord South Partners’ Torben Soelvsteen brings a career spanning more than three decades across organisational strategy, leadership development and change management in Europe, Asia, Australia and the United States. This is paired with direct defence experience as a former Officer in the Danish Armed Forces and long-standing work across defence and emergency services ecosystems in both Australia and Europe.

This combination of commercial and leadership depth, paired with defence fluency, allows decisions and execution to move at the pace defence manufacturers need, while staying grounded in technical realities.

If you would like to discuss what the EU–Australia defence framework could mean for your organisation, whether you are an Australian manufacturer looking to expand into Europe or a Nordic company exploring an Australian footprint or collaboration, connect with our team. We will help you identify where the opportunity fits, what readiness looks like for your specific capability, and how to build a structured pathway into the next phase of cross-border defence cooperation.

Sources: European Commission (ip_26_645); Prime Minister of Australia; Minister for Defence; European External Action Service; Council of the European Union; European Parliament; Australian Institute of International Affairs; International Institute for Strategic Studies; ASPI; Australian Defence Magazine; Business Sweden; Government of Sweden; Finnish Ministry of Defence; Bird & Bird; Nord South Partners.